Compare second charge mortgage options and prices with My Secured Loan
A second-charge mortgage is a type of loan which is secured against your equity in the property.
This means that if you don't keep up with the repayments on a second mortgage, your home is at risk.
It’s taken out in addition to the first mortgage you have on your home, but they’re completely separate from each other.
It can be used as an alternative to remortgaging or taking out a personal loan if you require a lump sum of cash, for instance to carry out renovations.
Essentially, you’ll have two mortgages on one property that aren’t linked in any way. They could even be from different lenders.
The amount a mortgage lender is willing to lend for your second mortgage will depend on the Loan To Value ratio (LTV). This won't always be up to 100%. Most second charge lenders have different ways of defining the LTV criteria and this depend on different factors, such as credit score, affordability, first mortgage amount, debts and household outgoing. Your personal circumstances and employment status will also be considered. The loan amount will also be impacted by your age and the amount of loan you're applying for.
You’ll make two mortgage repayments each month, one for your first mortgage and one for your second mortgage.
It’s different to remortgaging, which is when you switch deals to get a better mortgage rate or to release equity in your property.
You may want to think about getting a second charge mortgage if:
If you decide to move house, you’ll be required to pay off both mortgages in full, which could mean that you’re left with a very small deposit to put towards your next home.
There are some pros to taking out a second mortgage over remortgaging:
It isn’t a straightforward financial product, so here’s what you need to look out for:
Before applying for a second mortgage, you may want to think about:
Before taking out two mortgages, consider all the other options available.
Look at potential fees and charges and consider what would happen if you lost your job – how would you make two mortgage repayments per month?
Second mortgages are subject to the same affordability and financial checks as the first mortgages. As a borrower you should consider tidying up your finances, checking for unwanted subscriptions, making sure payments are up to date and check your credit score similar way you would do when applying for your first mortgage.
If you have any doubt, speak to an independent financial adviser to see whether it’s the right option for you.
This will depend on your financial circumstances. If you’re struggling to make your first mortgage repayments or aren’t sure you’d be able to comfortably pay off two mortgages simultaneously, don’t do it! You need to consider your income level, your first mortgage payments and other household expenditure as well.
Consider other options and speak to a financial adviser who can help you reach the right decision. It may be a case of saving up to fund your home improvements, which may be irritating if you want to do them now but will stop you from being put under financial stress.
They tend to have a higher interest rate than first mortgages, so they can be expensive and cost you more overall than remortgaging. This is because if you fall behind on your payments and your home is repossessed, your first mortgage lender will be paid before your second mortgage lender, so you’re viewed as more of a risk.
It’s worth noting that a second mortgage may be a cheaper way to borrow than a personal loan, depending on your circumstances.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES